B-158324, FEB. 10, 1966

B-158324, FEB. 10, 1966

TO THE SECRETARY OF COMMERCE:

REFERENCE IS MADE TO A LETTER OF JANUARY 12, 1966, AND ENCLOSURES, FROM THE ASSISTANT ADMINISTRATOR AND CONTRACTING OFFICER, SAINT LAWRENCE SEAWAY DEVELOPMENT CORPORATION (THE CORPORATION), REQUESTING OUR DECISION ON THE VALIDITY OF THE PROTEST OF EDWARD J. KANEB, DOING BUSINESS AS THE SEAWAY SHOPS, AGAINST THE PROPOSED AWARD OF A CONTRACT TO VANDS COMPANY UNDER INVITATION FOR BIDS (IFB) NO. 9757, FOR OPERATING THE FOOD AND GIFT SHOP CONCESSION IN THE "VISTA HOUSE," A BUILDING OWNED BY THE CORPORATION. THE PROTESTING BIDDER IS THE PRESENT CONCESSIONAIRE AT THIS LOCATION UNDER THE INITIAL CONTRACT AWARDED AFTER ESTABLISHMENT OF THE FACILITY IN 1960.

THE SUBJECT INVITATION, ISSUED SEPTEMBER 24, 1965, CALLED FOR BIDS ON FURNISHING THE SPECIFIED SERVICES FOR EITHER A THREE OR FIVE YEAR PERIOD ON EITHER A FIXED-FEE BASIS OR ON A PERCENTAGE OF GROSS SALES WITH A GUARANTEED ANNUAL MINIMUM BASIS. BEFORE THE SCHEDULED BID CLOSING DATE, ALL BIDDERS WERE NOTIFIED BY TELEGRAM THAT THE BID OPENING HAD BEEN EXTENDED TO NOVEMBER 12, 1965, TO PERMIT BIDS ON A ONE-YEAR TERM IN ADDITION TO THE THREE AND FIVE YEARS TERMS ORIGINALLY SPECIFIED. THIS TELEGRAM WAS FOLLOWED-UP BY ISSUING ADDENDUM NO. 1 TO THE IFB, WHICH REQUESTED ADDITIONAL BIDS ON A ONE YEAR BASIS. THREE BIDS WERE RECEIVED, AND THEY WERE OPENED ON NOVEMBER 12, 1965. ON THE BASIS OF THE ONE-YEAR TERM ALTERNATIVE, THE RETURN TO THE CORPORATION ON THE BEST BID OF THE THREE BIDDERS ON ANTICIPATED GROSS SALES OF $100,000 WOULD BE:

TABLE

VANDS COMPANY $14,375

KANEB 8,500

BIRMINGHAM 8,000

AFTER EVALUATION OF THE PRICES OFFERED, AS WELL AS EVALUATION OF OTHER FACTORS, THE DECISION WAS MADE TO AWARD THE CONTRACT TO VANDS, AND ALL BIDDERS WERE SO NOTIFIED AND GIVEN AN OPPORTUNITY TO PROTEST PRIOR TO THE PROPOSED AWARD ON JANUARY 5, 1966. AFTER RECEIPT OF KANEB'S LETTER OF DECEMBER 30, 1965, PROTESTING THE CONTEMPLATED AWARD TO VANDS, ALL BIDDERS WERE REQUESTED TO AND DID EXTEND THE ACCEPTANCE TIME TO THEIR BIDS UNTIL FEBRUARY 11, 1966. OUR DECISION IS REQUESTED PRIOR TO THIS DATE.

THE GROUNDS FOR KANEB'S PROTEST, AS STATED IN HIS LETTER MENTIONED ABOVE, ARE THAT THE SPECIFICATIONS ARE NOT PRECISE, CLEAR AND EXACT; THAT CONSIDERATION OF PRICE WAS GIVEN UNDUE WEIGHT AND OTHER FACTORS ADVANTAGEOUS TO THE GOVERNMENT WERE NOT GIVEN DUE CONSIDERATION; THAT HE WAS NOT AFFORDED PREFERENTIAL CONSIDERATION AS AN INCUMBENT CONCESSIONAIRE AS INDICATED TO BE THE PRESIDENTIAL POLICY AND AS PREVIOUSLY PROMISED BY THE CORPORATION OFFICIALS; THAT DUE CONSIDERATION WAS NOT GIVEN TO THE FACT THAT THERE WILL BE AN INCREASE IN THE VOLUME OF BUSINESS AND WITH THIS ESCALATION HIS BID WILL GIVE THE CORPORATION THE HIGHEST RETURN; THAT LOSS OF THE CONTRACT WILL LEAVE HIM WITH A LARGE INVENTORY OF SPECIALLY MARKED SEAWAY MERCHANDISE WITH LITTLE OR NO VALUE TO ANYONE ELSE; THAT THE VANDS COMPANY WAS NOT A LEGAL ENTITY AT THE TIME THE BID WAS SUBMITTED; AND THAT THE VANDS BID WAS "INVALID" BECAUSE IT DID NOT INCLUDE A BID PRICE ON THE ,FIXED FEE PER YEAR" AND "FIXED PERCENTAGE OF GROSS SALES WITH GUARANTEED MINIMUM PER YEAR" BASES UNDER EACH ITEM AND BECAUSE OF CERTAIN WRITING ADDED TO EACH ITEM.

THE SUBJECT SOLICITATION WAS ADVERTISED ON STANDARD FORM 33, DECEMBER 1964 EDITION, GENERAL SERVICES ADMINISTRATION, INVITATION, BID, AND AWARD, WITH THE FOLLOWING SPECIFICATION:

"THIS INVITATION FOR BIDS IS ISSUED PURSUANT TO THE FORMAL ADVERTISING PROCEDURES OF THE FEDERAL PROCUREMENT REGULATIONS. SEE CODE OF FEDERAL REGULATIONS, TITLE 41, CHAPTER 1. BIDS WILL BE CONSIDERED ONLY FROM THOSE PARTIES FINANCIALLY ABLE AND BY EXPERIENCE COMPETENT TO OPERATE THE FOOD AND GIFT SHOP CONCESSION OF THE VISTA HOUSE IN A FIRST-CLASS MANNER (DIGNIFIED, QUIET AND ORDERLY). REFER TO THE ATTACHED FACT SHEET, DATED SEPTEMBER 24, 1965 FOR FURTHER INFORMATION. BIDS SUBMITTED HEREUNDER WILL BE EVALUATED PRIMARILY TO DETERMINE WHICH BIDDER IS QUALIFIED TO PROVIDE THE MOST SATISFACTORY SERVICE TO THE PUBLIC AT REASONABLE RATES; THE CORPORATION, HOWEVER, RESERVING THE RIGHT TO REJECT ANY AND ALL BIDS SUBMITTED HEREUNDER.'

THEREFORE, IT IS OUR OPINION THAT THE VALIDITY OF THE KANEB PROTEST SHOULD BE DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF THE INVITATION AND THE FEDERAL PROCUREMENT REGULATIONS AS INTERPRETED AND APPLIED BY THE COURTS AND DECISIONS OF OUR OFFICE.

THE CONTENTION OF THE PROTESTING BIDDER THAT THE SPECIFICATIONS OF THE INVITATION ARE NOT PRECISE, CLEAR AND EXACT, IS UNSUPPORTED BY REFERENCE TO THE SPECIFICATIONS COMPLAINED OF, AND WITHOUT SPECIFYING WHEREIN THEY ARE DEFICIENT. UNLESS THERE IS CLEAR AND CONVINCING EVIDENCE THAT THE SPECIFICATIONS ARE UNDULY RESTRICTIVE, OR OTHERWISEA VIOLATION OF LAW, OUR OFFICE WILL NOT SUBSTITUTE ITS JUDGMENT FOR THAT OF THE CONTRACTING AGENCY IN DRAWING SPECIFICATIONS TO MEET ITS NEEDS. SEE 40 COMP. GEN. 294, 297.

THE CONTENTION THAT UNDUE WEIGHT WAS GIVEN TO PRICE, AND OTHER FACTORS ADVANTAGEOUS TO THE GOVERNMENT WERE NOT GIVEN DUE CONSIDERATION, IS CONTRARY TO THE RECORD PRESENTED. IN ADDITION TO OTHER MORE GENERAL REFERENCES IN THE INVITATION TO FACTORS WHICH WOULD BE CONSIDERED IN EVALUATING THE BIDS, PARAGRAPH 4 OF THE SPECIAL PROVISIONS PROVIDES IN PERTINENT PART, AS FOLLOWS:

"4. EVALUATION OF BIDS

THE CORPORATION WILL CONDUCT SUCH INVESTIGATIONS OF BIDDERS' FINANCIAL STATUS, EXPERIENCE AND OTHER QUALIFICATIONS AS IT MAY DEEM NECESSARY IN ORDER TO PROPERLY EVALUATE THEM. AMONG THE FACTORS IN ADDITION TO PRICE WHICH WILL BE CONSIDERED IN MAKING A DETERMINATION OF THE BEST QUALIFIED BIDDER ARE: THE BEST INTERESTS OF THE CORPORATION; BUSINESS REPUTATION, EXPERIENCE, MANAGERIAL ABILITY AND CALIBER OF PERSONNEL OF THE BIDDER; QUALITY OF FOOD AND MERCHANDISE TO BE SOLD, AND PRICES TO BE CHARGED THEREFOR.'

THAT THESE AND OTHER FACTORS WERE GIVEN DUE CONSIDERATION IS EVIDENCED BY A COMPREHENSIVE TABULATION OF 15 CATEGORIES ON WHICH EACH BIDDER WAS EVALUATED AND RATED. THE AREAS CONSIDERED IN THIS EVALUATION CLEARLY INDICATE THAT DUE CONSIDERATION WAS GIVEN TO FACTORS OTHER THAN PRICE.

MR. KANEB'S BELIEF THAT, AS AN INCUMBENT CONCESSIONAIRE, HE WAS ENTITLED TO PREFERENTIAL CONSIDERATION IN THE AWARD OF A NEW CONTRACT IS BASED ON THE STATEMENT OF THE PRESIDENT ON OCTOBER 9, 1965, UPON THE OCCASION OF SIGNING H.R. 2091, 1 PRESIDENTIAL DOCUMENTS 389, MONDAY OCTOBER 19, 1965, AND STATEMENTS OF CORPORATION OFFICIALS TO THIS EFFECT. THE PRESIDENTIAL STATEMENT WAS IN RELATION TO A BILL GOVERNING CONCESSION RIGHTS IN NATIONAL PARKS, WHICH ARE UNDER THE JURISDICTION OF THE DEPARTMENT OF INTERIOR, AND DOES GIVE PREFERENCE TO INCUMBENT CONCESSIONAIRES IN NATIONAL PARKS. ALTHOUGH THE PRESIDENT'S STATEMENT INDICATED THE DESIRABILITY OF A GOVERNMENT-WIDE POLICY IN THIS RESPECT, THERE IS NO SUCH REQUIREMENT APPLICABLE TO THE CORPORATION AT THIS TIME. THE RECORD SUBMITTED TO THIS OFFICE CONTAINS NO EVIDENCE, OTHER THAN MR. KANEB'S STATEMENT, THAT HE RECEIVED ANY PROMISE OF PREFERENTIAL CONSIDERATION, MUCH LESS A LEGALLY ENFORCEABLE ONE, AFTER THE EXTENTION OF THE INITIAL CONTRACT, AND THE LETTER OF AUGUST 26, 1964, EXTENDING THE CONTRACT TO DECEMBER 31, 1965, SPECIFICALLY NEGATES ANY SUCH PROMISE. IT IS ALSO NOTED THAT THE EXTENSION AGREED TO BY MR. KANEB ALSO RECOGNIZED THAT "THIS CONTRACT EXTENSION WILL PROVIDE SUFFICIENT TIME FOR ADJUSTMENT OF YOUR INVENTORY LEVELS CONSISTENT WITH THE TERMS OF THIS EXTENTION," WHICH DISPOSES OF HIS ARGUMENT IN THIS REGARD.

WITH REGARD TO THE CLAIM THAT BECAUSE OF THE ANTICIPATED INCREASE IN BUSINESS FROM THE SCHEDULED CANADIAN WORLD'S FAIR THE KANEB BID WILL RESULT IN A GREATER RETURN TO THE CORPORATION, IT IS REPORTED THAT THIS WOULD BE TRUE ONLY IF THE GROSS SALES WERE IN EXCESS OF $217,000, WHICH IS VERY SPECULATIVE IN VIEW OF AVERAGE GROSS SALES OF $98,500 IN THE SIX YEAR HISTORY OF THE OPERATION. IN VIEW THEREOF, WE SEE NO MERIT TO THE CONTENTION THAT THE KANEB BID MUST BE CONSIDERED MORE ADVANTAGEOUS TO THE GOVERNMENT ON THE BASIS OF PRICE.

THE CHARGE THAT THE VANDS BID WAS "INVALID" OR NONRESPONSIVE BECAUSE IT DID NOT INCLUDE BIDS ON THE "FIXED FEE PER YEARS" AND "FIXED PERCENTAGE OF GROSS SALES WITH GUARANTEED MINIMUM PER YEAR" ALTERNATIVES UNDER EACH ITEM AND BECAUSE CERTAIN WRITING WAS ADDED TO EACH ITEM, IS WITHOUT MERIT. THE INVITATION SPECIFICALLY PROVIDED THAT "ALTERNATE BIDS WILL BE CONSIDERED ON ALL OR ANY OF THE FOLLOWING ITEMS; NAMELY FOR A THREE OR FIVE-YEAR PERIOD ..., " AND THIS WAS ALSO APPLICABLE TO THE ONE-YEAR PERIOD ADDED BY THE AMENDMENT. THE FAILURE OF VANDS TO BID ON TWO OF THE THREE METHODS OF COMPUTING PRICE COULD PREJUDICE NO BIDDER OTHER THAN ITSELF SINCE IT WOULD ELIMINATE ITSELF FROM CONSIDERATION FOR AWARD ON EITHER OF THESE BASES. HOWEVER, SINCE IT WAS DECIDED THAT A ONE YEAR CONTRACT WITH THE PRICE FIGURED ON A VARIABLE PERCENTAGE OF GROSS SALES WOULD BE THE MOST ADVANTAGEOUS ARRANGEMENT FOR THE GOVERNMENT, THE BIDS WERE EVALUATED ACCORDINGLY AND VANDS IS THEREFORE THE LOW BIDDER. THE RATIONALE DISPOSITIVE OF THIS ISSUE WAS STATED IN 40 COMP. GEN. 321, 324 AS FOLLOWS:

"WHETHER CERTAIN PROVISIONS OF AN INVITATION FOR BIDS ARE TO BE CONSIDERED MANDATORY OR DISCRETIONARY DEPENDS UPON THE MATERIALITY OF SUCH PROVISIONS AND WHETHER THEY WERE INSERTED FOR THE PROTECTION OF THE INTERESTS OF THE GOVERNMENT OR FOR THE PROTECTION OF THE RIGHTS OF BIDDERS. UNDER AN ADVERTISED PROCUREMENT ALL QUALIFIED BIDDERS MUST BE GIVEN AN EQUAL OPPORTUNITY TO SUBMIT BIDS WHICH ARE BASED UPON THE SAME SPECIFICATIONS, AND TO HAVE SUCH BIDS EVALUATED ON THE SAME BASIS. TO THE EXTENT THAT WAIVER OF THE PROVISIONS OF AN INVITATION FOR BIDS MIGHT RESULT IN FAILURE OF ONE OR MORE BIDDERS TO ATTAIN THE EQUAL OPPORTUNITY TO COMPETE ON A COMMON BASIS WITH OTHER BIDDERS, SUCH PROVISION MUST BE CONSIDERED MANDATORY. HOWEVER, THE CONCEPT OF FORMALLY ADVERTISED PROCUREMENT, INSOFAR AS IT RELATES TO THE SUBMISSION AND EVALUATION OF BIDS, GOES NO FURTHER THAN TO GUARANTEE EQUAL OPPORTUNITY TO COMPETE AND EQUAL TREATMENT IN THE EVALUATION OF BIDS. IT DOES NOT CONFER UPON BIDDERS ANY RIGHT TO INSIST UPON THE ENFORCEMENT OF PROVISIONS IN AN INVITATION, THE WAIVER OF WHICH WOULD NOT RESULT IN AN UNFAIR COMPETITIVE ADVANTAGE TO OTHER BIDDERS BY PERMITTING A METHOD OF CONTRACT PERFORMANCE DIFFERENT FROM THAT CONTEMPLATED BY THE INVITATION OR BY PERMITTING THE BID PRICE TO BE EVALUATED UPON A BASIS NOT COMMON TO ALL BIDS. SUCH PROVISIONS MUST THEREFORE BE CONSTRUED TO BE SOLELY FOR THE PROTECTION OF THE INTERESTS OF THE GOVERNMENT AND THEIR ENFORCEMENT OR WAIVER CAN HAVE NO EFFECT UPON THE RIGHTS OF BIDDERS TO WHICH THE RULES AND PRINCIPLES APPLICABLE TO FORMAL ADVERTISING ARE DIRECTED. TO THIS END, THE DECISIONS OF THIS OFFICE HAVE CONSISTENTLY HELD THAT WHERE DEVIATIONS FROM, OR FAILURES TO COMPLY WITH, THE PROVISIONS OF AN INVITATION DO NOT AFFECT THE BID PRICE UPON WHICH A CONTRACT WOULD BE BASED OR THE QUANTITY OR QUALITY OF THE WORK REQUIRED OF THE BIDDER IN THE EVENT HE IS AWARDED A CONTRACT, A FAILURE TO ENFORCE SUCH PROVISION WILL NOT INFRINGE UPON THE RIGHTS OF OTHER BIDDERS AND THE FAILURE OF A BIDDER TO COMPLY WITH THE PROVISION MAY BE CONSIDERED AS A MINOR DEVIATION WHICH CAN BE WAIVED AND THE BID CONSIDERED RESPONSIVE.'

THE REMAINING GROUND FOR PROTEST PRESENTED IN MR. KANEB'S LETTER OF DECEMBER 30, 1965, CONCERNS THE LEGAL CAPACITY OF VANDS COMPANY TO BID AND RECEIVE AN AWARD. THIS CONTENTION IS BASED ON THE FACT THAT AT THE TIME THE BID WAS EXECUTED AND SUBMITTED THERE WAS NO PARTNERSHIP DOCUMENT OR PARTNERSHIP NAME; THAT THE COMPANY HAD NO OFFICE, STAFF OR WAREHOUSE; THAT THEY ARE NOT LISTED IN THE TELEPHONE BOOK; AND THAT THE COMPANY HAS NO RECORD OF PERFORMANCE. THE RECORD SHOWS THAT THE BID WAS SUBMITTED IN THE NAME OF "V.ANDS. COMPANY," SIGNED BY WILLIAM F. SHUTTS, PRESIDENT AND DATED NOVEMBER 11, 1965. UNDER THE "TYPE OF BUSINESS ORGANIZATION REPRESENTATION" PROVISION OF THE INVITATION THE BOX FOR "CORPORATION" WAS MARKED WITH THE FURTHER NOTATION THAT THE CORPORATION WAS "BEING" INCORPORATED IN NEW YORK. IN AN ACCOMPANYING STATEMENT OF THE BIDDER'S QUALIFICATIONS, V.ANDS. COMPANY WAS DESCRIBED AS AN "ORGANIZATION ... COMPRISED OF FIVE MEN ... SOME ENGAGED IN RETAIL AND SOME IN THE RESTAURANT TRADE.' THE STATEMENT ALSO REFERS TO THE JOINT STUDY OF THE BID PAPERS AND VARIOUS COSTS OF OPERATION, AS WELL AS A JOINT INSPECTION OF THE CONCESSION PREMISES. IT IS ALSO SIGNIFICANT TO NOTE THAT TWO OF THE FIVE MEN COMPRISING THE ,ORGANIZATION" ARE DESCRIBED AS "OUR RESTAURANT PARTNERS.' BECAUSE HE WAS IN DOUBT AS TO THE FORM OF ORGANIZATION, THE CONTRACTING OFFICER REQUESTED CLARIFICATION FROM VANDS AND A HEARING ON THIS MATTER WAS HELD ON NOVEMBER 30. AT THE HEARING AN EXECUTED PARTNERSHIP AGREEMENT DATED NOVEMBER 22, 1965, WAS PRESENTED BY V AND S. THIS AGREEMENT WAS EXECUTED BY THE SAME FIVE MEN DESIGNATED AS COMPRISING THE "ORGANIZATION" IN THE STATEMENT ACCOMPANYING THE BID. THE TESTIMONY DEVELOPED AT THE HEARING WHERE FOUR OF THE FIVE MEN WERE IN ATTENDANCE, INDICATED THAT AT THE TIME THE MEN GOT TOGETHER TO INSPECT THE PREMISES AND STUDY THE BID PAPERS AND COSTS OF OPERATIONS FOR THE PURPOSE OF ASSOCIATING TO BID ON THE SUBJECT CONTRACT, THEY ALSO DISCUSSED INCORPORATING THE COMPANY AT A FUTURE DATE, WHICH WOULD APPEAR TO EXPLAIN THE STATEMENT ON THE BID FORM THAT THE COMPANY WAS BEING INCORPORATED. WHILE THE COMPANY HAS NEVER BEEN INCORPORATED, A CERTIFICATE OF PARTNERS WAS FILED ON NOVEMBER 26, 1965, WITH THE COUNTY CLERK PURSUANT TO THE REQUIREMENT OF THE NEW YORK PENAL LAW, SECTION 440.

UNDER NEW YORK LAW, WHERE THE CONTRACT WILL BE AWARDED, SIGNED AND PERFORMED, A PARTNERSHIP IS DEFINED AS "AN ASSOCIATION FOR TWO OR MORE PERSONS TO CARRY ON, AS CO-OWNERS, A BUSINESS FOR PROFIT.' PARTNERSHIP LAW, SECTION 10. IT HAS BEEN HELD THAT AN ORAL PARTNERSHIP AGREEMENT IS VALID EVEN WHERE A WRITTEN AGREEMENT IS CONTEMPLATED BUT NEVER EXECUTED. KEEN V. JANSON, 187, N.Y.S.2D 825, AFFIRMED 11 A.D.2D 1039, 217 N.Y.2D 1001. WHETHER A PARTNERSHIP EXISTS, IN THE ABSENCE OF A FORMAL WRITTEN AGREEMENT, IS TO BE DETERMINED FROM THE FACTS. ONE OF THE TESTS TO BE APPLIED IN DETERMINING WHETHER A PARTNERSHIP EXISTS IS THE INTENTION OF THE PARTIES, WHICH MUST BE DETERMINED THROUGH THE CONDUCT AND DOCUMENTARY EVIDENCE OF THE PARTIES WHERE NO WRITING SETTING FORTH THE AGREEMENT EXISTS. KEEN V. JANSON, SUPRA. WE BELIEVE THESE PRINCIPLES APPLIED TO THE FACTS AND CIRCUMSTANCES AS OUTLINED ABOVE REASONABLY ESTABLISH THAT THE VANDS COMPANY WAS IN FACT A PARTNERSHIP AT THE TIME ITS BID WAS SUBMITTED.

SINCE "EVERY PARTNER IS AN AGENT OF THE PARTNERSHIP FOR THE PURPOSE OF ITS BUSINESS, AND THE ACT OF EVERY PARTNER, INCLUDING THE EXECUTION IN THE PARTNERSHIP NAME OF ANY INSTRUMENT, FOR APPARENTLY CARRYING ON IN THE USUAL WAY THE BUSINESS OF THE PARTNERSHIP ... BINDS THE TNERSHIP," PARTNERSHIP LAW, SECTION 20, ACCEPTANCE OF THE VANDS COMPANY OFFER WOULD CONSUMMATE A VALID AND BINDING CONTRACT.

IN ADDITION TO THE LETTER OF PROTEST TO THE CORPORATION, OUR OFFICE HAS HAD TWO INFORMAL CONFERENCES WITH MR. CLAYTON J. FAULKNER OF WASHINGTON, D.C., WHO HAS APPEARED ON BEHALF OF MR. KANEB. AT THE TIME OF THE SECOND CONFERENCE ON JANUARY 27, 1966, MR. FAULKNER DELIVERED A MEMORANDUM FROM MR. KANEB. IN THIS MEMORANDUM MR. KANEB ASSERTS THAT HIS DEALINGS WITH THE CORPORATION AMOUNTED TO A 15 YEAR CONTRACT FOR OPERATING THE CONCESSION AT THE VISTA HOUSE, AND THAT HE IS ALSO ENTITLED TO BE COMPENSATED FOR THOUSANDS OF DOLLARS OF EXTRA WORK AND SERVICES FOR THE CORPORATION DURING THE FIRST FIVE YEARS OF THE CONTRACT. TO ESTABLISH HIS CLAIM OF A 15 YEAR CONTRACT, MR. KANEB RELYS ON CERTAIN CONVERSATIONS WITH CORPORATION OFFICIALS WHEN CONSTRUCTION OF THE FACILITY WAS UNDER CONSIDERATION AND STUDY. IN ORDER TO RECEIVE APPROVAL OF THE CORPORATION'S BOARD TO BUILD THE FACILITY, ACCORDING TO MR. KANEB, HE WAS ASKED TO GUARANTEE 15 YEARS OF RENT TO AMORTIZE THE COST OF CONSTRUCTION. HE WROTE A LETTER MAKING SUCH A GUARANTEE AND THE BOARD'S APPROVAL WAS RECEIVED. ALTHOUGH THE ENSUING CONTRACT WAS FOR A TERM OF FIVE YEARS, MR. KANEB SAYS THAT HE WAS ASSURED HE WOULD BE GIVEN PREFERENCE IN A NEW FIVE YEAR CONTRACT IF THERE WAS A SUCCESSFUL AND SATISFACTORY OPERATION, AND THAT A NEW FIVE YEAR CONTRACT WOULD BE A MATTER OF FORMALITY IN VIEW OF HIS 15 YEAR GUARANTEE OF RENT. THIS ASSURANCE WAS CONFIRMED IN A LETTER OF AUGUST 16, 1960, FROM THE THEN ACTING ADMINISTRATOR. AS TO THE LETTER OF AUGUST 26, 1964, EXTENDING THE CONTRACT FOR ONE YEAR AND CANCELLING ANY "PRIOR UNDERSTANDINGS REGARDING A PREFERENTIAL CONSIDERATION ... ON A RENEWAL OR EXTENSION OF THE LICENSE," MR. KANEB SAYS THAT HE WAS TOLD THAT THIS WAS TO RELIEVE PRESSURE ON THE PART OF YOUR DEPARTMENT, AND THAT HE WOULD STILL BE TREATED IN A PREFERENTIAL MANNER WHEN THE CONTRACT WAS PUT OUT FOR BIDS.

ASSUMING, ARGUENDO, THE ALLEGATIONS OF MR. KANEB ARE CORRECT, IT IS CLEAR THAT NEITHER THE ORIGINAL CONTRACT NOR THE ONE YEAR EXTENSION THEREOF EMBODIED ANY TERM OR CONDITION GRANTING ANY PREFERENCE TO MR. KANEB. THE CONTRARY, THE LETTER EXTENDING THE ORIGINAL CONTRACT SPECIFICALLY NEGATES ANY UNDERSTANDING REGARDING A PREFERENCE. EVEN IF MR. KANEB HAD HAD SOME ENFORCEABLE RIGHT REGARDING A PREFERENCE PRIOR TO THAT TIME, IT WAS CERTAINLY LOST WHEN, IN CONSIDERATION OF AN EXTENSION OF THE CONTRACT, HE SO AGREED. MOREOVER, IT IS A FAMILIAR AND FUNDAMENTAL PRINCIPLE OF CONTRACT LAW THAT ALL ORAL NEGOTIATION, UNDERSTANDINGS AND AGREEMENTS LEADING TO A WRITTEN CONTRACT ARE MERGED THEREIN, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF ANY ANTECEDENT UNDERSTANDINGS OR CONTEMPORANEOUS ORAL AGREEMENTS. CORBIN ON CONTRACTS, SECTION 573.

MR. KANEB'S CLAIM FOR ADDITIONAL COMPENSATION IS APPARENTLY BASED IN PART ON THE TIME AND EFFORT HE EXPENDED IN HELPING TO DEVELOP THE PLANS AND SPECIFICATIONS FOR THE FACILITY. IT APPEARS THAT THIS WAS DONE ON A VOLUNTARY BASIS WITHOUT ANY INTENTION TO BE COMPENSATED THEREFOR. SINCE THERE DOES NOT APPEAR TO HAVE BEEN ANY CONTRACT, EITHER EXPRESS OR IMPLIED, FOR THESE SERVICES, THERE IS NO BASIS FOR PAYMENT. IT IS THE CORPORATION'S BELIEF THAT "EXTRA WORK AND SERVICES" REFERRED TO IN THE MEMORANDUM APPARENTLY CONCERNS CLEARING THE PARKING LOT, WHICH IS ALSO REFERRED TO IN THE DECEMBER 30 LETTER. ASIDE FROM THE FACT THAT THERE DOES NOT APPEAR TO BE ANY CONTRACTUAL BASIS UPON WHICH THESE ALLEGED SERVICES MAY BE COMPENSATED FOR, THE ADMINISTRATIVE PERSONNEL OF THE CORPORATION TAKE ISSUE WITH THE CLAIM. IT IS REPORTED THAT DURING THE PAST SEVERAL YEARS CORPORATION EMPLOYEES HAVE CLEANED THE PARKING LOT AT AN ESTIMATED COST OF MORE THAN $4,000. IT IS ALSO REPORTED THAT ON OCCASION EMPLOYEES OF THE CONTRACTOR HAVE TAKEN FULL TRASH BARRELS FROM THE VISTA HOUSE AREA AND EXCHANGED THEM FOR EMPTY ONES IN THE PARKING LOT. AT ANY RATE, IT IS CLEAR THAT THE FACTUAL BASIS TO SUPPORT A CLAIM FOR ADDITIONAL SERVICES IS FAR FROM BEING CLEARLY ESTABLISHED.

ALTHOUGH OUR RESPONSIBILITY WITH RESPECT TO WHOLLY OWNED GOVERNMENT CORPORATIONS IS LIMITED TO THAT OF MAKING AN ANNUAL AUDIT OF THEIR ACCOUNTS IN ACCORDANCE WITH THE PRINCIPLES AND PROCEDURES APPLICABLE TO COMMERCIAL TRANSACTIONS AS PROVIDED BY THE GOVERNMENT CORPORATION CONTROL ACT, AS AMENDED, 31 U.S.C. 846, 851, WE CONCLUDE THAT AWARD OF A CONTRACT TO VANDS COMPANY WOULD BE IN ACCORDANCE WITH THE APPLICABLE PROCUREMENT STATUTE, 41 U.S.C. 253 (B), AND REGULATION, FPR 1-2.407-1, WHICH REQUIRE THAT AWARD BE MADE TO THAT RESPONSIBLE BIDDER WHOSE BID, CONFORMING TO THE INVITATION FOR BIDS WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. IN VIEW OF THE FACT THAT THE PROTESTING BIDDER SUBMITTED A MEMORANDUM CONCERNING HIS PROTEST DIRECTLY TO OUR OFFICE, IN ADDITION TO THE LETTER TO THE CORPORATION, WE ARE SENDING A COPY OF THIS LETTER TO HIM.

THE FILE ENCLOSED WITH THE ASSISTANT ADMINISTRATOR'S LETTER OF JANUARY 12 IS RETURNED.